Posts Tagged ‘Tax Evasion’

The US started kicking the Swiss banks in the head over US citizens evading US taxes via Swiss banks. Will the US “tighten the screws” on the likes of MS, and will S’pore get caught in the row? Watch and wait.

The hearing featured a case study involving Microsoft’s shifting of IP rights for software developed in America, and the earnings that flow from them, to divisions in lower-tax Puerto Rico, Ireland and Singapore. One witness, Professor Stephen Shay of Harvard Law School, pointed out that in 2011 these three units enjoyed an average effective tax rate of just 4% and managed to book $15.4 billion of pre-tax profit—55% of Microsoft’s worldwide total. Their 1,914 employees generated an eyebrow-raising $8m of profit each, compared with $312,000 each for the 88,000 working in the rest of Microsoft. Whether or not this apportionment of profits complies with transfer-pricing rules, it is “not consistent with a commonsense understanding of where the locus of Microsoft’s economic activity…is occurring,” said Mr Shay. The claim that fair transfer prices were paid is “just not credible given the bottom-line outcome,” he added.

In 2011, the Senate investigators asserted, Microsoft’s parent company was paid $4 billion by Ireland and Singapore for rights that the two subsidiaries used to generate three times that amount in royalty payments from other bits of the group … A Microsoft man who was grilled at the hearing said the staffers’ sums ignored hefty, regular “buy-in” payments that the foreign subsidiaries have to make to the parent.

Great time for UBS’s survival to be questioned, when bonds held by GIC must be converted into UBS shares by 5 March, 2010.

[Reminder: In December 2007, GIC invested 11 billion Swiss Francs for these bonds that would give it 9% of UBS. It later had to invest an undisclosed amount to prevent a dilution of its stake when UBS called for a rights issue to cover mounting losses. Later the Swiss government had to take a 9% stake to cover yet more losses.]

Last August, it was feared that UBS would not survive if it were indicted in the United States for failing to provide details of tax evasion by US citizens (Note the concern abt UBS not surviving the indictment was not reported here: both in MSM amd bloggers). Its failure could have undermined Switzerland’s economy. And of course Singapore’s reserves.

Now: “The Swiss government on Wednesday backed off an agreement with the United States that required it to hand over the names of wealthy American clients of the Swiss bank UBS who were suspected of tax evasion.

‘The announcement, which came after two Swiss courts ruled that the disclosure of client names would be illegal because it would violate the country’s secrecy laws, threatened to open a new front in the investigation into UBS by the Justice Department.

‘While the Swiss cabinet … would continue talks with the United States on the matter … there was a risk that the United States would resume civil proceedings filed against UBS in a Florida court last year. That case sought to force UBS to disclose the names of 52,000 wealthy American clients suspected of tax evasion through UBS’s private bank.

‘That lawsuit was suspended in August when the Swiss government, acting on behalf of UBS during months of intense negotiations, promised to hand over 4,450 UBS client names.” Full article

So if no new settlement is reached, UBS can be indicted again. And the issue of whether it can survive will again be asked.

This is one jinked investment. Time for MM (GIC’s chairman) or Tony Tan (executive director) to go an visit some holy man to ask for the bad luck to go away?